Market Power In Electricity Markets: Regulation, Deregulation and Competition - Lessons From the Italian Experience and Other European and U.S. Case Studies

The purpose of this Essay is threefold. First, to describe the Italian reform in electricity markets, comparing the models of liberalization and privatization followed by the Italian legislator with the British and French experiences. Second, to analyze the structure of the Italian electricity industry, which arose from the reform, and to study its effects in terms of increased competition from the vertical separation of the former monopolist. For this reason the traditional definition of market power will be revised. New indicators of the existence of a dominant position will be described. Studying the peculiarities of this industry, it will be proven that market power depends on the firm capacity to modify the short-run marginal costs and to withhold some of its generation capacity. Third, to analyze how this notion of market power is subject to continuous change and to take into account the evolution of the electricity industry towards a multi-utility structure in a multinational context. MARKET POWER IN ELECTRICITY MARKETS: REGULATION, DEREGULATION AND COMPETITION-LESSONS FROM THE ITALIAN EXPERIENCE AND OTHER EUROPEAN AND U.S. CASE STUDIES